New owners' big plans for Marcus Hook refinery site

Sunoco Logistics , based in Philadelphia, bought the refinery site from its former parent company, Sunoco. APRIL SAUL / Staff Photographer

By Andrew Maykuth, Inquirer Staff Writer

Posted: May 11, 2013

Now that Sunoco Logistics Partners L.P. has taken ownership of the closed Marcus Hook refinery, the pipeline company has big plans for the Delaware River industrial site.

Sunoco Logistics chief executive Michael J. Hennigan provided analysts with details Thursday about how the pipeline and terminal company plans to repurpose the refinery as a hub for shipping liquid fuels produced from natural-gas drilling in the Marcellus and Utica Shales.

"We plan to create a world-class natural-gas liquids hub on the East Coast," Hennigan said.

Sunoco Logistics, based in Philadelphia, announced Wednesday that it had acquired the refinery for $60 million from its former parent company, Sunoco Inc. Both companies are affiliated with Energy Transfer Partners L.P., a Texas pipeline firm that acquired Sunoco last year.

Sunoco Logistics, whose aim in its previous life was to deliver crude oil to Sunoco's refinery network and move refined products to market, is repositioning itself as an independent pipeline company. On Wednesday, it reported $236 million in first-quarter earnings, a new record and a 40 percent increase from a year ago.

The Marcus Hook refinery, which has five deepwater berths, will become the anchor for Sunoco Logistics' Mariner East project, which will transport natural-gas liquids like propane and butane through an existing pipeline from Western Pennsylvania for loading onto oceangoing vessels in Marcus Hook.

The former refinery site already has substantial storage tanks, but the company plans to build some large refrigerated aboveground tanks for storing ethane, which must be supercooled to remain liquid. Most of the materials being shipped through Marcus Hook are destined for export as ingredients in chemical manufacturing.

The Mariner East project is scheduled to go on line in late 2014, but Sunoco Logistics is already bringing propane by truck and rail to Marcus Hook, Hennigan said.

"The Marcellus liquids today are finding their way to the coast and we're loading ships as we speak," he said.

Demand is so high for outlets to move fuels out of the Marcellus region that the company is planning to expand the Mariner East project, whose capacity is constrained by the size of the 8-inch-diameter pipeline.

The company has budgeted $600 million to complete the Marcus Hook connection as well as a second project, Mariner West, which is converting an existing pipeline to transport natural-gas liquids from Western Pennsylvania to Ontario.

The Mariner projects are in competition with other companies that want to build or convert pipelines from the Marcellus region in Appalachia to the Gulf Coast. Hennigan said he believes much of the material is destined for export, so it makes more sense to transport it to port by the shorter Keystone State route.

"Our view is that traveling 300 miles is much more competitive than traveling all the way down to the Gulf Coast to achieve the same end result of meeting the exports," he said.